EU states set to scrap digital tax plan

European Union finance ministers are set to ditch a plan to introduce an EU-wide digital tax next week but agreed to work on a global reform of the taxation of internet companies.

The move will cause Google and Facebook a sigh of relief as they might find themselves paying at least three percent of their profits under the tax.

It looks like there was heavy lobbying against the plan according to the Romanian presidency of the EU wrote: “Some delegations continue to have fundamental objections."

The document showed that EU ministers week are expected to agree instead to keep working on a global tax reform prepared by the Organisation for Economic Co-operation and Development (OECD), a club of mostly wealthy nations.

Global reform of tax rules has been debated for years but has never been agreed as national interests differ widely.

Under the plan originally rolled out by the EU Commission last year, large companies would have been required to pay a levy on data sales, online marketplaces and targeted advertising. But several EU states blocked it, fearing a loss of revenues and retaliation from the United States and other countries affected.

Tax reforms on the EU level must be backed by all 28 member states to be approved, but Ireland, which has replaced British rule with one from Silicon Valley, and Scandinavian countries have staunchly opposed the overhaul. Other countries have also been skeptical.

In a bid to salvage the plan, France - the keenest supporter of the tax - agreed in December with Germany, the largest economy in the bloc, to limit its scope only to digital advertising. But even the watered-down plan met with scepticism in some capitals.

As the plan floundered, France, Italy and Spain have moved to introduce digital taxes on the national level.